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Fixed Effects Estimation of Structural Parameters and Marginal Effects in Panel Probit Models

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Author Info
Ivan Fernandez-Val () (Department of Economics, Boston University)

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Abstract

Fixed effects estimators of nonlinear panel models can be severely biased due to the incidental parameters problem. In this paper I find that the most important component of this incidental parameters bias for probit fixed effects estimators of index coefficients is proportional to the true value of these coe±cients, using a large-T expansion of the bias. This result allows me to derive a lower bound for this bias, and to show that fixed effects estimates of ratios of coefficients and average marginal effects have zero bias in the absence of heterogeneity, and have negligible bias relative to their true values for a wide variety of distributions of regressors and individual effects. New bias corrected estimators for index coefficients and marginal effects with improved finite sample properties are also proposed for static and dynamic probit, logit, and linear probability models with predetermined regressors.

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Publisher Info
Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2007-009.

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Length: 44 pages
Date of creation: Feb 2007
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Handle: RePEc:bos:wpaper:wp2007-009

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Related research
Keywords: Panel data Bias Discrete Choice Models Probit Fixed effects Labor Force Participation.

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  3. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Levine's Bibliography 122247000000001061, UCLA Department of Economics. [Downloadable!]
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  11. Jawwad Noor, 2005. "Commitment and Self-Control," Microeconomics 0509008, EconWPA. [Downloadable!]
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Cited by:
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  1. Rubén Segura-Cayuela & Josep M. Vilarrubia, 2008. "The effect of foreign service on trade volumes and trade partners," Banco de España Working Papers 0808, Banco de España. [Downloadable!]
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